SECURITIES AND EXCHANGE COMMISSION

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SECURITIES AND EXCHANGE COMMISSION

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WASHINGTON, D.C. 20549

UNITED STATES

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DIVISION OF

TRADING AND MARKETS

February 26, 2019

Ellen Greene

Managing Director

SIFMA

120 Broadway, 35th Floor

New York, NY 10271

Re:

Request Re arding Rule 1004 of Regulation SCI

Dear Ms. Greene:

In your letter dated February 25,2019, you request assurance, acting on behalf of SIFMA

members and other similarly situated broker-dealers, as well as the SCI entities' listed on Exhibit

1 to your letter, that the staff ofthe Division of Trading and Markets ("Staff') would not

recommend enforcement action to the Commission under Rule 1004 of Regulation Systems

Compliance and Integrity ("Regulation SCI)2 if SCI entities conduct the annual testing of

business continuity and disaster recovery plans("BC/DR plans") required by Rule 1004 in the

same calendar month as the prior year, but more than 365 days after the testing date ofthe prior

year.

Rule 1004 requires, among other things, that an SCI entity perform functional and

performance testing ofthe operation ofits BC/DR plans3 with members or participants "not less

than once every 12 months" and that the testing of such plans be coordinated on an industry- or

sector-wide basis with other SCI entities.

In your letter, you describe the factors that SIFMA and SCI entities consider "to

determine the most effective date to conduct the annual testing." In particular, you note that

coordinated selection ofthe test date each year takes into account a range of considerations, such

as option expiry weekends,internal firm or exchange-specific operations, technology processes

Under Rule 1000 of Regulation SCI, the term SCI entity includes self-regulatory organizations("SROs")

(including stock and options exchanges, registered clearing agencies, FINRA and the MSRB),alternative

trading systems("ATSs")that trade NMS and non-NMS stocks exceeding specified volume thresholds,

disseminators ofconsolidated market data ("plan processors"), and certain exempt clearing agencies.

17 CFR 242.1004.

Rule 1001(a)(2)(v) of Regulation SCI requires members to have BC/DR plans that include maintaining

backup and recovery capabilities sufficiently resilient and geographically diverse and that are reasonably

designed to achieve next business day resumption oftrading and two-hour resumption of critical SCI

systems following awide-scale disruption. See 17 CFR 242.1001(a)(2)(v).

Ms. Ellen Greene

February 26,2019

Page 2 of3

(e.g., major planned systems changes), holidays, and other major industry testing programs.4

Because ofthese factors, SIFMA seeks flexibility to conduct the testing required by Rule 1004 in

the same calendar month as a prior year's test, but more than 365 days after the most recent test,

if necessary to establish the most effective testing date. For example,the 2018 coordinated

BC/DR plan testing occurred on October 10th,and SIFMA,after consideration ofthe factors

noted above, tentatively proposes that the next coordinated testing be conducted on October 26`n,

2019, and that testing for the two following years be conducted on October 24th,2020 and

October 23`d,2021.

As discussed in the SCI Adopting Release and noted in your letter, the key with respect

to the frequency of coordinated BC/DR testing is that it should "occur regularly enou~h to offer

practical utility in the event of a wide-scale disruption without imposing undue cost." Further,

the Commission recognized that coordinating industry-wide testing among SCI entities and their

members or participants may "present logistical challenges."6 The Staff recognizes that the

selection of a single date for industry-wide coordinated testing is not a simple matter, and

necessarily requires coordination with many entities and consideration of many factors as you

noted in your letter. The Staff is also cognizant that certain periods may not be optimal for this

testing because ofmarket-related events (e.g., option expiry weekends), holidays, or other

operational reasons.

Therefore, based on the facts and representations set forth in your letter, the Staff would

not recommend enforcement action to the Commission if the testing required by Rule 1004

occurred in the same calendar month as a prior year, but more than 365 days after the most

recent test; however, given the importance ofthe BC/DR testing requirement in ensuring that

SCI entities' BC/DR plans operate as intended in the event of a wide scale disruption, the staff

believes that it is appropriate that SCI entities give due consideration to all ofthese factors and

choose a testing date that will allow for the most effective testing.

This Staff position is based strictly on the facts and representations set forth in your letter

and any different facts or representations may require a different response. This response,

furthermore, expresses the Staffs position with respect to enforcement action only and does not

purport to express any legal conclusions. The Staff expresses no view with respect to any other

In particular, your letter references the SIFMA Business Continuity Planning tests, the Futures Industry

Association("FIA") annual test, as well as the Investment Industry Regulatory Organization of Canada

("IIROC")test. According to your letter,"[a]ligning the dates ofthese tests creates substantial efficiencies

for the test entities and participating firms and thus reduces operational and technology risks."

See SCI Adopting Release, 79 FR at 72354.

See id.

Ms. Ellen Greene

February 26,2019

Page 3 of3

questions that the proposed activities may raise, including the applicability of any other federal

or state laws, or self-regulatory organization rules. This position is subject to modification or

revocation at any time.

Sincerely,

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David S. Shillman

Associate Director

Division of Trading and Markets

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Invested in America

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SEC Ma~~

February 25, 2019

David Shillman

Associate Director

Division of Trading and Markets

Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Re:

Processing

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Requestfor No Action Relieffrom Rule 1004 ofRegulation SCI

Dear Mr. Shillman:

The Securities Industry and Financial Markets Association("SIFMA")1,acting on behalf of its

members and other similarly situated registered broker-dealers, as well as the "SCI entities"Z

listed on Exhibit 1 to this letter, respectfully request that the staff ofthe Division of Trading and

Markets ("Division") ofthe Securities and Exchange Commission ("Commission") provide

assurances that it will not recommend enforcement actions for failing to comply with Rule 1004

of Regulation SCI under the Securities Exchange Act of 1934("Exchange Act")3 if SCI entities

conduct the annual testing of business continuity and disaster recovery("BC/DR")plans required

by Rule 1001 in the same calendar month as the prior year, but the testing date in one year occurs

more than 365 days after the testing date in the prior year.

Regulation SCI Requires Annual Operational Testing of BC/DR Plans

Rule 1001(a)(2)(v) of Regulation SCI requires SCI entities to establish BC/DR plans. Rule 1004

of Regulation SCI requires SCI entities to conduct testing of the operation of these BC/DR plans

SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating

in the U.S. and global capital markets. On behalf of our industry's nearly 1 million employees, we advocate

for legislation, regulation and business policy, affecting retail and institutional investors, equity and fixed

income markets and related products and services. We serve as an industry coordinating body to promote

fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency.

We also provide a forum for industry policy and professional development. SIFMA, with offices in New

York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association

(GFMA).For more information, visit http://www.sifina.org.

Under Rule 1000 of Regulation SCI,the term "SCI entity" includes, among others, national securities

exchanges, registered securities associations, registered clearing agencies, certain exempt clearing agencies,

as well as alternative trading systems that exceed certain trading volume thresholds. k

See Securities Exchange Act Release No. 34-73639(November 19, 2014),79 FR 72252(December 5,

2014)("SCI Adopting Release").

Securities and Exchange Commission

SIFMA Request for No Action Relieffrom Rule 1001 of Regulation SCI

February 25,2019

Page 2

at least once every 12 months. In adopting Regulation SCI, the Commission stated that the key

for operational testing off BC/DR plans "is for testing to occur regularly enough to offer

practical utility in the event of a wide-scale disruption without imposing undue cost, and that a

minimum frequency of one year achieves this balance."4

Regulation SCI took effect on February 3,2015 with the first required operational testing of

BC/DR plans having to occur by a deadline of November 3, 2016.5 For the 2017 testing of

BC/DR plans, the requirement under Rule 1004(c)for industry- or sector-wide coordination was

in effect.6 Since October 2016, the SCI entities have conducted the required operational testing

of BC/DR plans in coordination with the annual SIFMA Business Continuity Planning tests,

which currently are held in October of every calendar year. The 2018 test was held on October

13~'.

SIFMA and SCI entities coordinate to determine the most effective date to conduct the annual

testing of BC/DR plans under Regulation SCI after considering several factors. SCI entities and

SIFMA member firms seek to avoid weekends where industry testing would be difficult,

including options expiry weekends, internal firm operations and technology processes associated

with calendar cycles, and holidays. In addition, there are major exchange system conversions

planned in October 2019 that require their own weekend testing programs and limit the number

of available weekends in October 2019 to conduct the Regulation SCI tests. If the test were

moved to September for 2019, then SCI entities would face the same timing issue for 2020 in

order to move the test back to October.

SIFMA Request to Allow Testing to Occur During a Single Calendar Month

Beginning with the 2019 BC/DR test, SIFMA requests that the Division Staff provide assurances

that it will not recommend to the Commission enforcement action based on the annual testing

required under Rule 1004 occurring in the same calendar month as the prior year's test but more

than 365 days after the prior year's test. SIFMA proposes the 2019 testing of BC/DR plans to be

held on Saturday October 26th, which would be more than 365 days after the 2018 test date of

October 13~`. SIFMA tentatively proposes that the testing dates for the two following years

would be Saturday October 24, 2020 and Saturday, October 23,2021.

Permitting the annual BC/DR testing to be held in the same calendar month as the prior year's

test, as opposed to strictly within 365 days of the previous testing date, allows for alignment of

the Regulation SCI test(and the SIFMA industry connectivity test) with other major industry

testing programs such as the Futures Industry Association ("FIA")annual test, as well as the

Investment Industry Regulatory Organization of Canada("IIROC")test, which occurs every

other year. SIFMA coordinates with the FIA and IIROC to identify potential test weekends and

Id. at 72354.

Id. at 72367.

Id.

Securities and Exchange Commission

SIFMA Request for No Action Relieffrom Rule 1001 of Regulation SCI

February 25, 2019

Page 3

have collectively agreed to these proposed testing dates. Aligning the dates of these tests creates

substantial efficiencies for the test entities and participating firms and thus reduces operational

and technology risks.

Conclusion

For the reasons stated above, SIFMA requests the Division provide assurances that it will not

recommend enforcement actions to the Commission for entities failing to comply with Rule 1004

of Regulation SCI if the required annual testing of BC/DR plans occur during October of every

calendar year, even if the testing date in one year is more than 365 days after the testing date in

the prior year.

SIFMA greatly appreciates the Commission's consideration ofthe issues raised above and would

be pleased to discuss these comments in greater detail with the Commission and the Staff. If you

have any questions or need any additional information, please contact me at 212-313-1287 or

e rg eene(a,SIFMA.org.

Sincerely,

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Ellen Greene

Managing Director

SIFMA

Securities and Exchange Commission

SIFMA Request for No Action Relieffrom Rule 1001 of Regulation SCI

February 25, 2019

Page 4

Exhibit 1:

The following SCI entities have consented to SIFMA's submission of this letter on their behalf:

BOX Exchange LLC;

The national securities exchanges operated by Cboe Global Markets: Cboe BYX

Exchange, Inc., Cboe BZX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe EDGA

Exchange, Inc., Cboe EDGX Exchange, Inc., and Cboe Exchange, Inc.;

The registered clearing agencies and exempt clearing agencies operated by the

Depository Trust &Clearing Corporation: The Depository Trust Company, The

Fixed Income Clearing Corporation, The National Securities Clearing

Corporation, and Omgeo;

The Financial Industry Regulatory Authority;

Investors Exchange LLC;

The national securities exchanges operated by Miami International Holdings, Inc.:

MIAX International Securities Exchange LLC and MIAX PEARL,LLC;

The Municipal Securities Rulemaking Board;

The national securities exchanges and alternative trading system operated by

Intercontinental Exchange, Inc.: the Chicago Stock Exchange, Inc., New York

Stock Exchange LLC,NYSE American LLC,NYSE Arca, Inc., NYSE National,

Inc., and Global OTC;

The national securities exchanges operated by Nasdaq, Inc.: The Nasdaq Stock

Market LLC,Nasdaq BX,Inc., Nasdaq GEMX,LLC,Nasdaq ISE, LLC,Nasdaq

MRX,LLC,and Nasdaq PHLX LLC;

The Options Clearing Corporation; and

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